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Providing coverage of Alaska and northern Canada's oil and gas industry
August 2006

Vol. 11, No. 32 Week of August 06, 2006

Senate votes to open door to new Gulf drilling

Anchorage Daily News

With political anxiety on Capitol Hill rising along with gasoline prices, the Senate voted Aug. 1 to open a large section of the Gulf of Mexico to oil and gas drilling, advancing the energy bill that stands the best chance of approval this year.

The bill, approved 71-25, now must be reconciled with a broader, and more controversial, House measure that would relax the decades-long ban on drilling in most coastal waters, including along the Pacific coast.

Senators from both parties, attuned to constituents’ frustration over high fuel costs, were eager to pass energy legislation before heading home for the summer recess. Eighteen Democrats joined 53 Republicans to support the Senate bill; 24 Democrats and one independent were opposed.

Though the bill would not affect Alaska, both the state’s Republican senators voted for it.

Sen. Ted Stevens had tried to expand the measure so Alaska could benefit from a revenue-sharing proposal it contains, but Senate leaders blocked him in late June, restricting any moneys to the states along the Gulf of Mexico, where the vast majority of the nation’s offshore drilling takes place.

“We were told at that time that if that provision stays in, it would be a death sentence for this bill,” Sen. Lisa Murkowski said.

Nonetheless, she said, she was supporting the bill because it would provide the nation with a badly needed source of natural gas, one that can be brought to market fairly soon. She also said it gives the Gulf states — Alabama, Louisiana, Mississippi and Texas — “reasonable revenues” to offset the impact of offshore production and last year’s hurricanes.

House version would lift Bristol Bay ban

Some critics of the Senate bill, such as Taxpayers for Common Sense, say it is too generous to the states. Environmentalists also worry that elements of the House version will creep in when Congress tries to reconcile the two bills. The House bill poses a threat to Alaska’s Bristol Bay, says Eric Siy, director of the Anchorage-based Alaska Marine Conservation Council.

Drilling is now banned in the area by presidential moratorium. The House bill would lift the ban.

Sponsors of the House bill say the legislation allows any state that doesn’t want drilling to keep the rigs 100 miles away from its shores, but Siy said states would have to go through a cumbersome process to object.

The Senate bill would limit new drilling to about 8.3 million acres in the Gulf of Mexico, an area believed to contain more than 1.2 billion barrels of oil and 5.8 trillion cubic feet of natural gas.

By contrast, the House bill would lift the nationwide ban on drilling beyond 100 miles of the coast. It would also let each coastal state decide whether to permit energy exploration within 100 miles of its shore.

States will get share of royalties

In return for opening their coasts to energy exploration, states would get a share of royalties — a provision backed by Gulf Coast senators of both parties. Even so, a large number of coastal-state officials, including Republican Gov. Arnold Schwarzenegger of California, oppose the House proposal.

The Senate measure is the product of a fragile compromise worked out by GOP leaders with Sen. Mel Martinez, R-Fla., who dropped his opposition to drilling in the eastern Gulf of Mexico in return for a provision of the bill that would prohibit drilling within 125 miles of the Florida panhandle through 2022.

To win the backing of Gulf Coast lawmakers, the bill would give Louisiana, Alabama, Mississippi and Texas a bigger chunk of royalties from drilling in the newly opened area.

The Bush administration has expressed support for the Senate bill, calling it important to national security.

According to an Aug. 2 report from the New York Times, the companies say they will be delighted to see any compromise worked out in conference and enacted after the summer recess.

“We’re making real headway, there is no question about that,” Shell’s vice president for exploration in the Americas, Annell R. Bay, was quoted in the Times, attributing the advances in the House and the Senate largely to a shift in popular opinion in favor of exploiting more domestic oil and gas resources.

She said that Shell would still concentrate its efforts in the Gulf of Mexico and offshore Alaska, but that “future opportunities off the eastern and western coasts are going to be worthwhile to look at as well,” the Times reported.

Turning point in debate

Sen. Pete Domenici, R-N.M., chairman of the Senate Energy and Natural Resources Committee, predicted that it would be the first step toward lifting the moratorium on coastal drilling in other parts of the country.

The vote was a turning point in the decades-long debate over offshore drilling.

New offshore drilling, banned in most U.S. coastal waters since the 1980s, has long been a hotly debated environmental issue, especially in California, site of a devastating oil spill off Santa Barbara in 1969. But pressure to allow new offshore drilling has been growing, especially from farm and business groups hard hit by increased fuel costs.

A number of Democratic candidates are seeking to portray Republicans as puppets of the oil companies, which have reported huge profits this year.

In turn, GOP candidates have assailed Democrats for blocking measures to increase supplies, including drilling in the Arctic National Wildlife Refuge.

Editor’s note: ADN reporter Liz Ruskin, Richard Simon and Maura Reynolds of the Los Angeles Times, and Kay Cashman of Petroleum News, contributed to this report which was largely from both ADN staff and wire reports.






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